Fredrik Engdahl, head of commercial operations at Magine, talks about the challenges facing OTT TV service providers and how they can benefit from outsourcing their platform requirements.
The two main barriers to entry for launching an OTT TV service are technology/distribution and content/subscriber acquisition. Depending on what type of company or organisation you are, the weight scales of these barriers are tilted slightly differently. ISPs, for example, might already have the fundamental technology infrastructure in place for OTT distribution but lack the content and marketing, as well as OTT-specific BI systems to realise good enough subscriber acquisition.
At the other end of the scale, a content producer or content owner could be looking for direct distribution of their popular content to existing fans, but lack the required technology and infrastructure for OTT distribution. Both of these barriers can be overcome by working with a fully managed end-to-end OTT platform provider, where technology and distribution are taken care of, and best-practice marketing and content frameworks can be leveraged to ensure subscriber acquisition and growth of an OTT service.
How significant a barrier is the need to make big upfront investments and how can this be overcome?
Historically the major obstacle for launching and maintaining an OTT service by yourself was the requirement for significant CAPEX investments, alongside considerable time for development and implementation, resulting in a long time to market. The complexity of launching your own OTT service is often underestimated, leading to long delays or not being able to meet the original vision or objectives for the service.
Companies looking to build OTT businesses should focus on what they do best and what will help to ensure their service succeeds in the long term – content – and consider outsourcing their end-to-end OTT service to a provider like Magine. Managed service providers are a low-risk investment as they operate an OPEX-model, eliminating the need for traditional CAPEX-heavy investments and technology investment risks. Outsourcing also guarantees a much quicker time to market, which means you’ll see a return on investment sooner.
How challenging is it for OTT TV operators to keep the cost of operating a service – including content licensing costs – under control and what solutions are available?
For a company not traditionally present in the technology or infrastructure domain, it can be challenging anticipating and controlling all operating costs associated, such as CDN-costs, ingestion costs etc., alongside the resources and time required to maintain a separate OTT platform and service. In addition to that, OTT operators need to determine their consumer end price, 70-80% of which is often the content licensing costs, in order to realise a profitable business case.
The solution to this is unit economics, attainable by using a platform vendor’s aggregated pricing for infrastructure, ingestion, distribution and content. Economies of scale are difficult, if not impossible to realise as a standalone OTT platform and service, but by using a vendor platform like Magine, the economies of scale attainable for the vendor are shared by all partners using the same platform.
How significant a challenge for OTT TV operators is restrictions on the availability of rights and what can be done to overcome this?
Content is still king, and getting rights for popular shows can be a major challenge. Producing your own original content is a way of circumventing this but it’s expensive and investing in unproven content can be risky. At Magine, we help our partners overcome content acquisition challenges by assisting with cross-licensing between partners on our platform. For example, a content holder targeting a specific regional market can cross-license their relevant content to another content holder on our platform who operates in a different regional market, making great content accessible to larger audiences across the world.
What aspects of building an OTT service does it make sense for operators to outsource and what are the key means by which they can differentiate their offerings?
In the OTT market today, content and customer relationship management are the key factors that can differentiate an OTT service from the competition. When building an OTT service, operators should focus on funnelling as much of their investment capital and resources into these areas as possible to achieve high subscriber acquisition and retention long term.
This can be accomplished by onboarding an OTT managed service provider that offers a more efficient OPEX cost-model, reducing any need for large upfront CAPEX-investments. This is not to say you should only outsource the technology. At Magine, we enable OTT business to get off the ground by providing our partners with fully managed end-to-end OTT services alongside content acquisition, marketing, customer and sales support. Our partners can leverage our years of direct to consumer experience and create a strong foundation to launch and successfully grow their own OTT service.
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